Cartels take shape in TV distribution

Written by Sohini Mitter | Updated: Jun 29 2012, 17:10pm hrs
TV distributionTV distribution
Top broadcaster alliances seize bargaining power; local operators cry hoarse over monopolisation, threaten groups of their own

Following the formation of IndiaCastthe television distribution joint venture between TV18 Broadcast and Viacom 18 Media the distribution space is headed for cartelisation, with big alliances consisting of top broadcasters seizing the bargaining power from multi-system operators (MSOs) and local cable operators (LCOs).

While on one hand such alignments are aimed at checking piracy of cable signals, it also means reduced carriage costs and increased subscription revenues for broadcasters. It will also help them tap into newer markets and widen their consumer base.

We will see more consolidation in television distribution. Broadcasters will come together to stop under-declaration by cable operators and command better rates from them, said Jehil Thakkar, head, media and entertainment at KPMG, in an earlier interaction with FE .

Competition is set to intensify among three such major alliancesMediapro (JV between Star DEN and Zee Turner), One Alliance (JV between Multi Screen Media and Discovery Networks) and the newly formed IndiaCast that will distribute all channels of TV18Viacom18, A+E Networks, Sun Network, Disney and Eenadu Group across all platforms, including cable, DTH, IPTV, HITS and multichannel multipoint distribution service (MMDS).

Together, these alliances will distribute nearly 165 channels (Mediapro 78, OneAlliance 30 and IndiaCast 57). These big alliances ensure that cable operators cannot afford to leave out your bouquet of channels in their feed; if they do, they will be left with nothing, says Subhashish Mazumdar, SVP (marketing), InCable, a MSO owned by the Hinduja Group. They will also have to comply with the demands of big broadcasters.

On the other hand, smaller channels which don't align themselves to either of these alliances run the risk of being left out from the feed, he adds.

Many cable operators are crying hoarse about a potential monopolisation in the TV distribution industry and are threatening to form cartels of their own. This coming together of big networks is a negative for the TV industry and the Competition Commission should look into the matter, says a leading cable operator, who did not wish to be quoted.

If more such alliances are formed, MSOs and LCOs will be compelled to form partnerships of their own; small cable operators are still dominant in most markets, he adds.

Broadcasters, on the other hand, dismiss claims that such alliances will give undue advantage to them by allowing them to dictate terms to local cable operators. The idea is to be collaborative, bring as many people together from all segments of the industry, rather than trample over one section to go on to the other section, Uday Shankar, CEO of Star India had said at the announcement of MediaPro in May last year.

Cable TV is a largely under-declared market. Of the R20,000 crore TV subscription revenues generated every year, only 15-20% reaches the broadcaster, while the rest is pocketed by the cable operator.

Distribution alliances such as MediaPro and IndiaCast will enable broadcasters to maximise their subscription revenues, which form only about 20-30% of their overall revenue.

The rest comes from advertising. Subscription revenues will be one of the major growth drivers. We will look to achieve a 50:50 split between advertising and subscription, says Punit Goenka, MD & CEO of Zee Network, which earns more than 40% of its revenues from subscription. l